Gold And Silver – Current Decline Not Over. Watch Market Activity For Turnaround.
Posted on February 16, 2013

We often make a distinction between buyers of physical precious metals, [PMs] and
buyers of futures, exhorting the former to buy with impunity, and some may see that
as cavalier, given how the price for both gold and silver have been in recent decline.

The point for buyers of PMs is for both protection and creation of wealth. Protection
against insidious central bankers destroying currency-purchasing power, over time,
and wealth creation as evidenced by those buying PMs over the past decade and seeing
the intrinsic value grow dramatically.

Buyers of the physical are less price sensitive and view current declines as opportunity
to add more. As an example, we still hold physical silver purchased when price was in
the mid-40s. Has the relative value declined? Absolutely. Concerned? Absolutely not.
It remains a matter of time when the price of PMs will go dramatically higher, and the
concern will not be how much one paid, $1800 or $1600 the ounce for gold, or $45 or
$30 the ounce for silver. The concern will be over having any at all.

If gold is to go to $3,000, $4,000 $5,000, or wherever, and silver go to $100, $150, or
$250, there will be many who will be glad to have paid $2,500 the ounce for gold, and
$75 the ounce for silver. How does that compare to $1,800 and /or $45 purchases for
physical PMs, at this point? One cannot always time the market, which is why consistent
buying over time is strongly recommended, but one can determine whether to be an
owner of PMs, or not.

The problem moving forward is fear of central bankers changing the rules and precluding
the purchase of any PMs by the public, at any price. Death and taxes are touted as the
two things one cannot escape, [not always true for the latter], but the certainty of lies and
deception by central bankers/planners runs an immediate third place.

The handwriting is on the wall, as most in PMs know only too well. We mention this for
those on the fence, those waiting for “bargains,” [misplaced values, there], and those who
have not yet purchased any PMs. Do not wait, do not wait, do not wait!

For futures, while most everyone is of the mind that manipulation is showing a steady
hand in PMs markets, that “hand” is losing its grip. It is the charts that show what the
market has to say about what those who are participating are saying about their decisions.
A not so simple statement, but one that says, watch developing market activity to know
what is going on.

That is always our purpose.

While ongoing efforts are being made to suppress the price of PMs and discourage their
purchase, mostly in futures markets, the “Discouragees,” [central bankers,] have been net
buyers of gold for a few years now, after having been sellers for so long, so do not go by what central bankers say, [often voiced through the puppetmeisters on daily financial
"news" programs], go by what they do, only in this area. Ignore them, otherwise.

The larger picture for gold is as bullish as ever. We provide two strong facts to confirm
why, on the monthly chart. Bullish spacing is referenced as such because it shows the
degree of eagerness of buyers in a market. It is measured by noting the last swing high
and the last swing low. Typically, markets retest previous swing highs. When buyers
are so intent on being long in a market, they do not wait to see if a retest of the last swing
high will be successful. Instead, they, [and by "they" we mean smart money participants,
or controlling forces], just keep buying breaks, creating a space that is bullish.

Another and related measure is the extent of a break, or market “give-back,” in a reaction
after a rally. Monthly charts are more controlling than the lower time frames, so the
information you can glean from them is more reliable and more pertinent. You can see
how the current break since the September 2011 high has been relatively shallow when
compared to from where the rally began.

Despite the “daily grind lower,” recently, the larger focus is very strong. Very strong.

A trading range is where smart money operates to accumulate or distribute their positions.
Controlling market forces require time to acquire positions so as not to disrupt their
attempted “sleight of hand” buys/sells during the process, and the TRs are also used to
discourage participants from following them.

We said last week that $1600 was a possible target, and it was reached on Friday. Will
that area hold? “NMT.” Need More Time to know that answer.

Points 1 and 2 form an upper supply channel line, and a further line down is marked by
dashes to show how it extends into the future, well ahead of price activity. Point 3 is the
low is between points 1 and 2, and it is from there that a horizontal line, a demand line,
is extended lower. It is also dashed to show that it extends into the future well ahead of
developing price activity, to be used as a guide to gauge potential support when touched
by yet to develop market declines.

You can see how the dashed line held the December lows, and now February is retesting
it, again. There is no evidence yet of a turnaround, and it does take time for a market to
turn.

The most interesting aspect of the daily chart happens to be the last bar, Friday’s activity.
It is a wide range bar lower, a sign of EDM, [Ease of Downward Movement], indicating
sellers are in control. The sharply higher volume is a red flag, a point in time for which
one needs to pay close attention, moving forward.

Remember, sharp volume increases are usually smart money either pushing a market even
more, or starting to take the other side in a transfer of risk. Subsequent developing market
activity usually indicates which. This volume day prompted a look at intra day behavior to
see if any clues can be gleaned.

We say smart money always tries to hide their intent, but volume is something they need
in order to move or accumulate positions, and they cannot hide that. If smart money sells
highs and buys lows, where is the highest volume in this chart? We ask, the chart answers.

The position of the close tells us buyers are more than matching the effort of sellers to
cause a rally off the low under such heavy selling pressure. The two preceding bars of
increased volume may “look” like selling, but it is quite possible that smart money has
been buying on the way down, taking everything offered by weak-handed longs selling
out and new shorts getting in.

If Benjamin Franklin had been a trader, he would surely have said, “Never a bottom-
picker be.”

Bullish spacing exists in silver, just not as strongly. We do point out how the past five
months of selling effort has not been impressive, relative to the two month rally prior.
It is like an Ali “Rope-A-Dope,” taking all the punches from his opponent, but protecting
himself so not much damage is inflicted, despite the effort against him. Eventually, he
comes out stronger to defeat his now-weakened opposition.

We show the same intra-TR channel down, just like in gold. Unlike gold, however, silver’s
low has held the lows of last December, a small show of relative strength within a negative
trading environment. Still, no apparent end is at hand in the decline of futures.

The best way to trade a TR? Not to trade it at all, instead, wait for a price breakout and
go with it. Why does that work? As mentioned, TRs are how smart money accumulates
positions. Once they are done, they then begin the mark-up or mark-down phase, and it
will last for some time, once it gets underway.

Just as a dashed line in a channel projects into the future for support/resistance, you can
see where the failed probe lower, at the end of December/beginning of January acted as
support. From there, a horizontal line is drawn. We made it dashed to show that is was
extended into the future much earlier than when current price activity has returned to it.

Will price hold current lows? No one knows, and anyone who says otherwise is showing
an unwise ego trying to be “right,” as opposed to being in harmony with the market. Any
bottom requires time in order to turn around, and any potential turnaround always needs
to be confirmed by price behavior.

The increased volume on Friday is a red flag, as it was for gold, but a red flag means a sign
of caution, to take note and see how price responds to it. That takes time. Futures players
have time, or at least the smart ones are exercising it.

They bashed silver just like this last year and kept it at $27.50 or around there for months on end. Better get used to the 20's. We are most likely going to stay here for a while. Just look at what happened last year. Different year, same game:) Good thing the real thing is selling for just under 40 bucks on Ebay still. Check it out paper suckers! Haha

I am thinking of pulling out a home equity loan and have some simple questions for those who have experience using them.

Typically how long is the loan for? Is it the same amount of time as the home mortgage?

Is the interest rate typically the same as a mortgage or more?

I am wanting to take out a small loan, 30 - 40k, and BTFD!

Does anyone have any advice or prior experience that they wouldn't mind sharing?

Thanks.

I approximate a monthly payment of roughly $200 and no more than $250. While most of this is interest, who cares if silver doubles in the next 2-3 years. Also, can I pay off the loan whenever? Penalties?

it's a 10 year running at 2.25 w/800+ credit either interest or interest and principal... 1 year interest cap up to 50k max at 3.99 50k plus after... or libor +3/4 no closing but $300 if closed within 3 years... this was two weeks ago...

A home equity line of credit (HELOC) typically lasts at least as long as the mortgage, but need to be renewed periodically. Rates are usually around 30-year rates, but can be less, depending on your lender's need to lend. You can elect to just pay interest as you go, or pay down the principal. In my state, there are no prepayment penalties, but check in your state. Lender will tell you.

Woah.... did you guys catch that last down-draft? Within seconds, it plunged about .20.

This is very, very discouraging. I had hoped that silver would be in the high $30's by now. I even told my entire family at Christmas that they should "load up the truck." Now they're calling and asking what's going on. Let's hope it doesn't slice through any trend lines.

I can float the ~$200 payment. I am still young, under 30s. I am positive I will see a return within 2-3 years that will make me very happy.

However, I am avoiding all other debt. My wife and I are about finished paying off her student loan debts. Not bad considering she graduated in the Spring of 2011. We have some other debts that if the baby weren't coming this Summer would all be paid off.

With that said, I'll take a look at your link.

Thanks.

Oh, and it will be strictly for physical only... and maybe a metal detector.

I agree with TF on this and at this point after having seen so many funny things in the PM's day after day I actually expect to see the smack downs and I kind of laugh them off. It's become normal and anticipated so it offers no real disappointment to myself when it happens. Expect it and toughen up.

Shining or handling your stack on days like this (or any other day) is a relaxing thing to engage in. I have 10 Morgan$ I leave out all the time as a visual reminder of what it's all about for me. Picking them up and clinking them in your hand like a palmful of poker chips is soothing on some level.

I encourage you to go get a few of your favorite coins/bars out and let the ensuing clinking or clanging resonate within you :-)

says we must be close to the bottom. Markets go up and down based on one thing....emotions....yes charts and technicals and such are a factor as well but they are the overall result of two human emotions. Fear and greed. Which of these two emotions is stronger? Well I would say for the banksters and experienced traders investors neither. Because experienced traders/investors have learned to check their emotions at the door. For Joe retail, fear is the stronger emotion and that is generally why you see waterfall declines in a stock or market vs more gentle rallies. FEAR is rampant here today. Is gold and silver going lower....maybe.....am I concerned.....not really.

As long as you have positive real interest rates on relatively safe debt either of governments or private issuers, there is in my opinion no real reason to hold gold at all except as an emergency fallback.

You see positive real interest rates on relatively safe debt? I don't.

As long as the governments of major countries can be trusted to manage their public debt in a sound way there is really no particular reason to hold gold

You seen any governments lately of major countries that are managing their debt in a sound way? I don't.

One of the most important issues in the banking industry right now is the availability of sound collateral.

You know of any sound collateral in the banking industry, that is collateral that's not toxic? I don't except maybe the gold they've been buying.

There is now a global shortage of high quality collateral, and the reason is that government debt of many major countries has become compromised by extremely poor economic and financial management.

A good read for the down and out today. Patience is the order of the day and I know many will say I have been patient for the last two years....well more patience is required if your going to be on the right side of the great RESET.

Ancientmoney : Been watching both 30 year that was 3.67% w/o points... or 3.35% w/2 pts ...HELOC looked good since it was lower rate based on the 10 year FED rate and a small fix was possible under 50k... things may have changed but I have 100% equity to work with and good credit...

Not sure how you can keep your sanity when silver - the only thing that we have to protect our wealth - is constantly (every damn day!) getting killed. Yesterday, last month, last year.... it's just endless. Every day it does down!

I try to work in my garage to distract me, but it just eats me alive. Then I try and think that's it's only paper, and I feel a little better.

DISCLAIMER: The charts and analysis provided here are not recommended for trading purposes. Trade at your own risk. The Turd provides knowledge not direction. Turd holds no liability for your trades and decisions but he's happy to take credit when credit is due, particularly through the "donate" button. Read more...